In one way or another, most small companies need to use a car or truck to conduct business. For example, oftentimes a sales agent may need to drop off a contract to a buyer at her office. If the agent uses a company-owned car that is insured by the company and gets into an accident along the way, the business is covered. But, if the agent uses his or her own car, the company is not covered unless it has purchased non-owned and hired-automobile insurance.
Most small and midsized companies are aware of the importance of this vital protection, but the proper coverage terms, conditions and financial limits needed to absorb these risks and fully transfer them to an insurance company are less known.
Businesses need insurance coverage for the cars, trucks, vans and other vehicles used for company purposes. This insurance is very similar to coverage for vehicles used for personal travel, but it is not part of traditional Businessowners Policies (BOPs), so it must be purchased separately.
Business auto insurance includes liability insurance for bodily injury and property damage that may result from an accident involving a company-owned car. Other coverages include uninsured and underinsured motorist coverage, medical payments coverage, and Personal Injury Protection (PIP). However, only liability insurance is required by most state laws.
Business auto insurance protects a small business owner from severe financial loss in the event of an unanticipated, devastating accident. But this is only the case if the company owns the vehicles involved in the accident. If an employee uses his or her car on any errand related to the business and is involved in a motor vehicle crash, the owner of the company can be held accountable for related losses.
The key words are “any errand.” If an employee is asked to pick up a client from the airport, drop off a company letter at the post office or buy ink for the printer at the office supply company, these are all company errands, even if they are completed in the employee’s own car.
Business owners should still consider vehicle-related insurance, even if their company does not own any cars. If an employee is involved in an accident while doing work for the company, however minor, the company could still be held liable.
Management experts urge all companies to avoid that risk by purchasing non-owned and hired automobile liability insurance, which kicks in like traditional business vehicle insurance to absorb potential financial losses. The insurance covers bodily injury and property damage losses caused by both non-owned vehicles, such as employees’ cars, as well as vehicles that are hired, rented and even borrowed.
But remember, while broad coverage terms and conditions are common in non-owned and hired automobile liability insurance, not all policies are alike. For example, many policies exclude bodily injuries to the employee and to non-employees such as a spouse, child or parent who may be in the car at the time of the accident.
Also typically excluded is an employee's personal property damaged in an accident. In most cases, the driver’s automobile insurance policy would pick up those costs.
Other policies require business owners to have liability insurance on their commercial automobile policies to carry non-owned and hired liability insurance, with the same financial limits of protection for both.
The best way to determine what coverage limits are needed is to discuss the operations of the business with a professional insurance agent. The goal is to purchase maximum financial protection absorbing the entirety of the loss, minus a small deductible to bring down the expense of the premium.